Macroeconomics Answers

The production price index...

1) Represents the supply side of the economy
2) Reflects the cost of living standards
3) Can only be calculated on annual bases
4) Takes all goods and services into consideration

To calculate the consumer price index accurately, it is necessary to include...

1)The value added tax in the prices
2) Intermediate goods
3) Consumer goods only
4) Capital goods only

Which of the following statements regarding definition and measurement of inflation is/are correct?

1) The consumer price index (CPI) is directly related to the cost of living
2) The producer price index (PPI) measures the cost of living rather than the cost of production
3) The continuous increase in the price of crude oil is an example of inflation
4) The consumer price index (CPI) is an index of the prices of all the consumer goods and services

During an economic depression, an appropriate policy initiative would be to...

1) Increase the taxes
2) Increase the interest rate
3) Increase the consumption spending
4) Decrease the government spending

An expansionary monetary policy will be less effective if...

1) The aggregate supply curve is very steep
2) The multiplier is very large
3) The investment demand is responsive to the interest rate
4) The aggregate demand curve is very steep

Which one of the following will shift aggregate supply to the right?

1) A fall in the general price level
2) An increase in aggregate spending
3) Improvements in productivity
4) A decrease in interest rate

Which of the following will shift the aggregate demand curve to the left?

1) An increase in the general price level.
2) An increase in productivity.
3) An increase in the net exports.
4) A reduction in government spending.

Which one of the following statements regarding the aggregate supply is/are correct?

a) An increase in the cost of labour will result in a decrease in both aggregate supply and the general price level.
b) A decrease in the prices of imported capital will cause an increase in the aggregate supply and a decrease in the general price level.
c) A decrease in productivity will cause a decrease in the aggregate supply and a decrease in the general price level.

1) b and c
2) a and c
3) b
4) a
5) All the statements are correct

Which of the following statements regarding the AD-AS model is/are correct?
a) An expansionary fiscal policy occurs when either consumption spending, or government spending are increased.
b) A contractionary monetary policy occurs when there is a decrease in interest rates, ceteris paribus
c) In the AD-AS model, demand management policies can be used to influence aggregate demand and aggregate supply.

1) All statements are correct
2) b
3) c
4) a and b
5) a and c

In the AD-AS model...

1)the AS curve illustrates the levels of total expenditure in the economy at various price levels.
2)we cannot study monetary policy because the model assumes interest rates to be fixed.
3)the level of economic activity is determined by aggregate supply, given the general prices in the economy.
4)we seek to explain the general price level and the aggregate production of goods and services.